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Wednesday, 20 August 1980
Page: 496

Mr HOWARD (Bennelong) (Treasurer) - by leave- In June 1978, the Chairman of the House of Representatives Standing Committee on Expenditure, the honourable member for Lilley (Mr Kevin Cairns), announced that the Committee had resolved to inquire into the Australian Industry Development Corporation. The Chairman indicated that the purpose of the inquiry was to inform the House of the operations of the Corporation, an organisation which had been established in 1970 and which had not been subjected to parliamentary scrutiny. The inquiry was the first by a standing committee on expenditure on the operations of a major statutory authority. The Standing Committee's report was tabled in this House on 20 February 1 980.

Mr Kevin Cairns - It was a very good one, too.

Mr HOWARD - Yes, it was. The Committee received submissions and heard written evidence from many persons and organisations, including the AIDC itself. I do not intend to detail all the findings and recommendations of the Committee in this statement. The report has been available to honourable members for some time, and the findings and recommendations are clearly identified in the report. However, it is appropriate to mention some of the major issues identified by the Committee. The Committee found that the Corporation has an established role in the Australian capital market, generally for lending sizable amounts in the medium to long term area. It considered that the AIDC can usefully continue to complement the activities of other lending institutions, and expressed its satisfaction that the AIDC has developed expertise as a financial adviser in the restructuring of industries and in the development of new techniques for financing industrial development.

The House of Representatives Standing Committee on Expenditure found that the obligation on the AIDC to consider non-commercial aims in financing operations may have affected its commercial performance and has created a degree of uncertainty and difficulty in judgment of that performance. From the broad findings, and other more detailed conclusions, flowed the Committee's recommendations. The Committee recommended that the provision of the Act that the AIDC should act in accordance with sound business principles in the performance of its functions should override non-commercial aims in its financing operations. In relation to the capital structure of the Corporation, the Committee recommended that the Act be amended to provide that the liabilities of the Corporation be guaranteed by the Government; to allow the maximum gearing ratio to be varied by the Board in consultation with the Reserve Bank; to require any uncalled capital to be included in the capital base for measuring gearing; to provide that, other than in stated circumstances, additional government funds be provided in the form of subordinated loans; and to permit paid-up capital to be used in the Corporation's operations. It is recommended that the areas in which the Corporation may operate be extended to include explicitly service industries. There is a number of recommendations in a more administrative vein.

The Government has considered the Standing Committee's report in accordance with the undertaking given to this House by the Prime Minister (Mr Malcolm Fraser) on 25 May 1978 that Ministers and the Government would give full and careful attention to reports by committees of this Parliament. Honourable members will recall, however, that the Committee of Inquiry into the Australian Financial System chaired by Mr J. K. Campbell and known as the Campbell Committee was also requested by its terms of reference to inquire into and report on specialist development finance institutions including the Australian Industry Development Corporation.

As is evident from the outline of the recommendations that I have given, some of the Standing Committee's proposals are far-reaching. If adopted, they would have fundamental implications for the nature of the Corporation. The Committee indicated in its report that it left the question of the role of AIDC in the Australian capital market, as well as overall deficiencies in that market, to examination by the Campbell Committee. I have formally referred a copy of the Standing Committee's report to the Campbell Committee and the Chairman indicated that the matters raised in the Standing Committee's report will be considered in relation to the Campbell Committee's inquiries on the operations of the AIDC.

In the circumstances, therefore, it is felt that it would be inappropriate for the Government to reach views on the Standing Committee's recommendations in advance of its consideration of the Campbell Committee's report. The Chairman of the Standing Committee in effect recognised this in the statement he made to the House when tabling the report. He said at that time that the two reports - the Standing Committee's report and the Campbell Committee's reports - 'can hardly be considered exclusive of one another'. The Government has decided, therefore, to give further detailed consideration to the Standing Committee's recommendations at the time that it considers the Campbell Committee's report on AIDC.

Before concluding I wish to inform the House that I propose to introduce legislation early in these sittings to amend the Australian Industry Development Corporation Act 1970 to increase the Corporation's maximum gearing ratio of borrowings- other than for temporary purposes- to paid capital and reserves from 5 : 1 to 8 : 1. The higher gearing ratio would permit AIDC to finance its commitments without a call for additional capital from the Budget. While that amendment is not inconsistent with the Committee's recommendation on this matter - it is in fact in accordance with the spirit of finding (0 of the report of the Committee- it does not in any way prejudice consideration of this or any other recommendation of the Committee which as I have said will be considered together with the Campbell Committee recommendations on AIDC. I take this opportunity on behalf of the Government to thank the members of the Standing Committee- and in particular the honourable member for Lilley- for the time and effort they expended considering the issues and preparing the report.

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